Wednesday, February 15, 2012

Taxpayers whose employers provide company cars (or trucks and vans) for their personal use must factor that usage into their gross income. Personal use of a vehicle provided by an employer is considered fringe benefit income, and taxpayers generally may calculate its value using the "cents-per-mile" rule outlined by the IRS. (Under this rule, usage in 2012 is equal to 55.5 cents per mile.)

Cents-per-mile Valuation
In order to use the cents-per-mile valuation rule, the vehicle's fair market value may not exceed a specified dollar amount. The IRS periodically updates this amount to reflect the market, and do so again in mid-January by issuing Rev. Proc. 2012-13. For company cars, trucks, or vans first placed into service in 2012 the amounts have increased. The maximum 2012 FMV amounts for use of the cents-per-mile valuation rule are:

$15,900 for a passenger automobile (up from $15,300 in 2011); and

$16,700 for a truck or van, including passenger automobiles such as minivans and sport utility vehicles, which are built on a truck chassis (up from $16,200 in 2011).

It should be noted that the Rev. Proc. 2012-13 dollar caps apply only to qualifying employer-provided automobiles first made available for personal use in calendar year 2012. Vehicles first used for personal purposes in previous years must use the limits designated by the IRS for those years.

Fleet-average Valuation
Employers with a fleet of at least 20 automobiles can average the value of its fleet to calculate the fair market value of the automobiles within it. The IRS has also updated the maximum fair market value amounts under which vehicles qualify for the use of the fleet-average valuation rule in 2012. They are $21,100 for a passenger automobile and $21,900 for a truck or van. The fleet-average valuation rule cannot be used if the value of any vehicle in the fleet exceeds these FMVs.

Please feel free to call Doeren Mayhew for a more targeted explanation of how these new regulations impact your business operations.

If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.